Statutory Gifts Rider: What it is and why you need one

As previously discussed in this blog, a Power of Attorney (POA) is a great start to your advance planning. But in some circumstances, it may not be enough to accomplish your goal of making sure the financial transactions that might be needed can be carried out if you become incapacitated. A Statutory Gifts Rider (SGR) is a document that supplements a power of attorney. The two documents go hand in hand. A POA can stand alone, but a SGR is only valid if it accompanies a properly executed power of attorney and is signed at the same time.

What does the SGR do? In a nutshell, the SGR expands your agent’s power to make certain gift transactions in your best interests. While a POA gives your agent the authority to handle your financial matters, without a SGR, your agent’s ability to gift on your behalf is limited to a total annual amount of only $500. You might be thinking that you don’t typically make gifts to your family or others over that amount each year anyway, so no big deal. BUT, if you become incapacitated, there could be a very good reason to make sure your agent can gift your assets in an amount over $500 in a year. The reason is Medicaid.

If you require nursing home care and need to qualify for Medicaid, your agent may need to spend down your assets quickly. In order to qualify for Medicaid while still protecting as many of your assets as possible, a “gift and loan” strategy may be used. Through use of this method, you may be able to shield up to half of your assets from being used to pay for the costs of a nursing home, while still qualifying for Medicaid assistance. However, to maximize the protection afforded by employing a “gift and loan” plan, it would require your agent to make gifts over the $500 limit. The SGR allows your agent to make gifts and transfers to any person in any amount. Additionally, through the SGR, you may permit your agent, who is often a spouse or a child, to gift to him/herself. This unlimited gifting ability is imperative for maximum asset-preservation purposes. It gives your agent the ability to safeguard the assets you’ve worked hard to pass on to your family (rather than having to spend the bulk of it on nursing home expenses) and still enable you to qualify for Medicaid benefits.

A SGR also gives you the option to grant power to your agent to change beneficiary designations on your life insurance, annuities or retirement plans. In addition, you can give your agent the ability to access funds from your IRA or 401(k). This could be an invaluable power if the funds were needed to pay for your medical treatment, or the exorbitant cost of some prescription medication not covered by insurance. The rider also includes language complying with HIPAA requirements pertaining to privacy in healthcare, allowing your agent access to your medical records.

The SGR grants expanded powers to your agent and can be extremely valuable if you become incapacitated. While your agent may never need the extra powers afforded by a SGR, if you become incapacitated without having one in place, it will be too late.

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